Frequently Asked Questions
about
Gifts and Endowed Funds
What is a gift?
A gift is a voluntary transfer of items of value from a person or organization where no goods or
services are expected, implied, or forthcoming for the donor. Gifts normally take the form of
cash, checks, securities, real property, or personal property. Gifts may be unrestricted or
restricted to a general area of use that benefits the College or one of its components. Wabash
considers endowments as gifts.
By accepting a gift, the College assumes responsibility for adhering to any restrictions the donor
imposes on its use. Such restrictions must be observed for as long as the College holds the fund.
If a donor's restrictions become impractical or difficult to meet, Wabash will work with the
donor to revise the restrictions. If the donor is no longer living, Wabash may apply to a court of
law for cy pres to legally change the restrictions, meeting the donor's original intent as closely as
possible.
What are endowment funds?
Endowment funds are invested to produce revenue. Endowment revenue may or may not be
restricted as to purpose.
Types of endowment funds:
Permanent (true) endowment funds are funds in which the donor specifies that the
principal holdings must be held in perpetuity⎯only income distributions (spendable
income) may be expended. A true endowment fund is permanently restricted. The income
may be either restricted or unrestricted.
Quasi-endowment funds function as if they are endowments. The funds are retained and
invested, rather than expended. Usually there is no donor specification. Unlike permanent
endowments, the principal (corpus) of quasi-endowments may be expended by the College
as needed.
Term endowment funds are similar to permanent endowment funds except that, upon the
passage of a stated period of time or the happening of a particular event, all or part of the
principal may be expended.
What is market value?
Market value is the book value of the original gift plus net gain or loss.
Prepared by the Office of College Advancement
and the Business Office
What is investment income earned?
Investment income earned is determined by a spending formula approved by the College's Board
of Trustees. It must remain within a designated range of the fund's average market value over
the last twelve quarters, between 4% and 6% with a goal of 5%.
How are College endowment funds managed and invested?
The Investment Policy Committee of the Board of Trustees, including the Chief Financial
Officer of the College, determines the spending and management policies for the College's
investments. Wabash has great confidence in the oversight and management of the College
endowment.
John W. Bachmann '60, Trustee Emeritus and retired Managing Partner of Edward Jones, chairs
the Investment Policy Committee of the Board of Trustees. He and committee member Fred W.
Ruebeck '61, former Director of Investments at Eli Lilly & Company, have built an asset
allocation model that guides Wabash's investment decisions. The Committee hires the firms who
manage the College's investments. The College contracts with the Fund Evaluation Group, LLC
to track the performance of its investments.
What is the payout rate of the total return pool and how is it determined?
The College distributes to its funds the interest and dividends actually earned plus a prudent
amount of the net investment gains. The College's spending policy is to pay out 5% more than
the prior year. This is subject to the payout being no less than 4% or no more than 6% of a 12quarter moving average of the market value of the total return pool. The goal is to maintain the
payout at 5% of the 12-quarter average.
How much money can I expect to go into the investment income earned account of my fund?
The long-term goal is 5% of market value.
What is the minimum required to establish a permanent endowment account?
Endowed Scholarship: $100,000
Named "Holding Account" Fund: $16,000 to establish a holding account for funds until it
grows to $100,000. Additional gifts may be added to the principal.
Endowed Professorships: Minimum amounts required to establish professorships at
Wabash are:
Endowed Senior Professorship (research and program funds): $1,500,000
Endowed Professorship: $1,000,000
Endowed Professorship for junior/visiting faculty: $750,000
For other purposes: the fund should be large enough to provide sufficient income to fund
the intended activity.
6/13/07
What is a separately held endowment?
A separately held endowment is a restricted donor investment, invested separately rather than in
the total return pool. A separately held endowment bears all gains, losses, and investment
management costs associated with its investments.
A separately held endowment offers less flexibility and increased investment risk due to the lack
of diversity available to individual investments, and does not benefit from the investment
expertise of the total return pool. The payout to the spendable income account for a separately
held endowment is the actual investment earnings or losses of that account.
What is the procedure when a non-cash endowment gift is received?
Non-cash gifts include stocks or bonds, real estate, or other valuable assets. Each type of noncash gift is handled differently. In the case of publicly traded stocks and bonds, the gift value is
the mean of the high and low values on the date Wabash receives the security. For other assets
the College requires a professional appraisal, paid for by the donor.
What gift/endowment reports will I receive and how often?
Wabash generates a report for each fund, describing the historical value, market value, and
spendable income based on a closing date of June 30 of the previous fiscal year. The report is
mailed to the donor or fund contact in November each year.
Whom should I contact to set up a new endowment fund?
Wabash Development Office (765-361-6365 or development@wabash.edu).
Who can answer my questions about existing endowment funds?
John B. Culley, Jr. '69, Comptroller (765-361-6419 or culleyj@wabash.edu).
We hope these questions and answers were helpful
in understanding Wabash College's
gifts and endowed funds policies.
6/13/07